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3/17/2014 10:35AM

Why Adjustable-Rate Mortgages Make a Comeback

Adjustable-rate mortgages, those tricky things that were a big part of the housing crash, are making a comeback, but of course, the people selling them say this time it’s different. Annamaria Andriotis reports on MoneyBeat. Photo: Getty Images.

This transcript has been automatically generated and may not be 100% accurate.

... ay ay mm mm ... good morning good Monday morning at the same Patrick's day this is MoneyBeat I am Paul vignette ... starting off with amenities than the adjustable rate mortgages Metro much trouble it clawed ... back in the day well they are making a comeback ... but of course the people selling them tell you ... this time it's different is that different ... AnnaMaria and FiOS's here with the story wrote that story ... owing ... to allow things to be here ay ay adjustable rate mortgage that has one of those things you use your and you're the knee-jerk reaction of ... oh God that's gotta be a terrible thing ... what is a terrible thing this time around ... it depends at this time around the banks are saying it's not a terrible thing because ... they're picking these loans to a very specific group of borrowers ... at those are the people for well off most the clients with in their wealth management and private banking division's when they see happy assets have the income to be able to afford these loans even when rates rise ... so the problem artists and the problem that many borrowers experience with these loans ... during the downturn of enduring to the housing boom ... out with that I'm in awe and only have a fixed rate for set period of time ... and then once that period is over and the rates become valuable on and ... it's very difficult to know how high I your way could be calm on ... and that ... poses the risk too many borrowers ... that to to address this key point about the kinds of people taking out these loans but full of Summit short story from your story with the headgear ... thing you see here I he'll take a walk us through this and see what was going on in the deafening come right so if if the body is essentially what we're seeing here ... is that of the mortgages that were given out between this range during the fourth quarter of twenty thirteen ... I'm only seven percent that that accounted for on the rest the rest were fixed rate mortgages but NBC howled down that is significantly from the housing boom when they accounted for as much as you forty five percent to fifty percent of loans given out in this range ... now we go to the next level three hundred fifty thousand just over ten to fifty thousand to four to seventeen thousand when looking at ten percent ... mini gets afford to seventeen ... to one million this is a crucial range because he represents in many markets what it considered the jumbo mortgage as ... the accounted for thirty one percent on account of the thirty one percent of these loans given out during either for quite of twenty thirteen Dow is up from twenty two percent a year prior it's the highest since the third one or two thousandeight here's ... here's the question ... um we know where interest rates are right now we know what the Federal Reserve's plans all are ... we know that interest rates are going up ... why he didn't take one of these things out now ... it's a gamble and the borrower score signing up for these are doing it to get the interest rate savings right now if you take a look at the spread between the rates being offered on ... jumbo fixed rate mortgages and our seats here which is about one point five percent of percentage points that is the largest it's been in some cases in more than a decade ... the family can get into our ... at two point nine percent or lower for the first five years versus a four point five percent rate on a fixed rate thirty year mortgage what you can see how the savings would amount to tens of thousands of dollars ... now the pencil say of course that were doing it differently this time it's not going to ... indoctrinate our balance sheet A more risky ... it ... can lead to me rely on that though ... I think the agenda for the time being the credit scores are very high much higher than they were during the down beat during the housing boom ... I've downpayments a very high higher arm so they are in fixed rate mortgages ... so that banks are really getting these but these loans out the best borrowers out there however we are seeing some low sitting ... with some lenders led Nissan to Sell and look at the point any unions this is one example where there hiking on their borrowers are a lot of retirees people on fixed income depending largely and social security ... of investing in the canteen and a small rate mortgage right now which is creepy a cash flow sure it's great but what will happen to these people drive six years from now and that